Europe’s ethane prices drop amid imports from US

“It’s already impacted the thought processes,” the Borealis CEO said. “Statoil realized that if they wanted to carry on selling ethane they will have to compete with the stuff that will be brought in by Ineos.”

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By ANDREW NOEL

Bloomberg

Borealis, the Abu Dhabi-owned maker of chemicals, is already
benefiting from rival Ineos Group's plans to import cheaper
ethane into Europe, even though the first
tankers wont dock for another year, according to CEO
Mark Garrett.

The prospect of Ineos shipping ethane from the Marcellus and
Utica formations on the US East Coast starting in mid-2015
has already affected the price Borealis secured for ethane
from Norways Statoil this month by reducing the
suppliers pricing power, Garrett said.

Its already impacted the thought processes,
Garret said. Statoil realized that if they wanted to
carry on selling ethane they will have to compete with the
stuff that will be brought in by Ineos.

Borealis, based in Vienna, is studying whether it can also
import US ethane as an alternative to sourcing the feedstock from the North Sea.
Rather than operating a fleet of smaller ships to run North
Sea supplies, importing from the US would require the
purchase of large tankers to keep the cost-per-ton down and
guarantee security of supply. Borealis would also have to
ensure sufficient storage facilities.

How Ineos gets on with its plan will provide valuable insight
for Borealis as both companies would take ethane from the
same US formations and use the same Marcus Hook export
terminal. For Statoil, it was a case of negotiating a price
with Borealis for a long-term supply agreement rather than
blending the ethane back into natural gas supplies.

We think its great Ineos is doing it, as
its helped us in our other negotiations, the CEO
said. Well also see that it works as they are a
bit ahead of us in the time schedule.

Technical Review

Borealis, 64% owned by International Petroleum Investment Co.
and 36% by Austrias OMV, is reviewing the technical
aspects of the project, including the need to
adjust crackers to accept more ethane, Garrett said.

The bulk of Europes crackers are mixed
feed or run on naphtha, so would require a complete revamp to
convert them to ethane, Garrett said.

US shale gas and the expansion of energy companies in
emerging markets are changing the hierarchy of global petrochemical companies, with
Borealis, China Petroleum & Chemical Corp., known as
Sinopec, and Saudi Basic Industries Corp. increasing the
challenge to the likes of Dow Chemical and DuPont, Garrett
said.

That means a new chapter for Europes chemical industry
will emerge, Garrett said. The 1990s was a period of
consolidation, with the creation of Borealis from the
combination of assets owned by Statoil, Neste Oil and OMV,
and Ineos being formed from BP's divestment of its
operations.

Garrett said he expects another wave of consolidation in the
region as more intense competition will put the squeeze on Europes higher-cost chemical
facilities, many of which are more
than 30 years old.

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